1057 Words5 Pages

Question one
Ratio plays important role in analysing company’s performances, whether the company made improvement from previous year or to compare against other company similar industry. It also shows investor especially for creditors such as bank to know their financial performances.
From the question, the bank manager told that ABC Limited has too low working capital and too high gearing ratio. Working capital relates the company’s current assets and current liabilities. It measures the ability of the company to pay their current liabilities with their current assets. By this ratio, it also measures the liquidity of the company and bank is interested in this ratio. ABC Company is not doing well as their working capital is too low and will*…show more content…*

It clearly shows that Acer does not have very good inventory control compare to Dell and high risk that banks will not give loan. Investors or banks will be interested to know this ratios as a guaranteed for loans or funds given. The next ratio is assets turnover ratio which measures how efficient a company uses their assets to make sales. Acer has higher ratio of 1.73times compare to Dell which is 1.24times. It is important for the company to monitor their performance as creditor tends to know how well the company use their assets to produce the products. Acer and Dell are both in same industry, they are using almost same assets but in this case, Acer is more efficient compare to*…show more content…*

Acer has payable days of 69 days while Dell has 95 days to pay their debt. In this case it is recommended to pay debt in longer period of time so that the company will have more cash to survive. Acer will be at risk to have less cash and will affect their performance. Other ratio will be the receivable turnover ratio which Acer has 5.52times while Dell has 8.69times. Dell has higher turnover compare to Acer and Acer will be at risk because lower turnover will consider not so good performance by the investors and bank as it will lead to lower assets. The last ratio will be Acid Quick ratio, Acer has ratio of 0.94:1 while Dell 0.97:1. This shows Acer is slower in paying debts with current assets excluding inventory which is easily converted into

It clearly shows that Acer does not have very good inventory control compare to Dell and high risk that banks will not give loan. Investors or banks will be interested to know this ratios as a guaranteed for loans or funds given. The next ratio is assets turnover ratio which measures how efficient a company uses their assets to make sales. Acer has higher ratio of 1.73times compare to Dell which is 1.24times. It is important for the company to monitor their performance as creditor tends to know how well the company use their assets to produce the products. Acer and Dell are both in same industry, they are using almost same assets but in this case, Acer is more efficient compare to

Acer has payable days of 69 days while Dell has 95 days to pay their debt. In this case it is recommended to pay debt in longer period of time so that the company will have more cash to survive. Acer will be at risk to have less cash and will affect their performance. Other ratio will be the receivable turnover ratio which Acer has 5.52times while Dell has 8.69times. Dell has higher turnover compare to Acer and Acer will be at risk because lower turnover will consider not so good performance by the investors and bank as it will lead to lower assets. The last ratio will be Acid Quick ratio, Acer has ratio of 0.94:1 while Dell 0.97:1. This shows Acer is slower in paying debts with current assets excluding inventory which is easily converted into

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